Obama Debt Commission Calls for<br> $1 Trillion in Net Tax Hikes

Submitted by admin on Wednesday, November 10th, 2010, 3,01 PM

UPDATE: h/t to Jim Pethokoukis of Reuters who pointed out via Twittter that the commission's tax plan treats capital gains as ordinary income, which would put the capital gains rate well into the 20s from today's 15 percent.

Today, President Obama’s Simpson-Bowles debt commission chairmen released a preliminary report. It confirms what everyone has known—this commission is merely an excuse to raise net taxes on the American people. Support for the commission chair plan would be a violation of the Taxpayer Protection Pledge which over 235 Congressmen and 41 Senators have made to their constituents.

ATR President Grover Norquist submitted testimony to the commission over the summer. These spending cuts would have balanced the budget without raising taxes.

By its own admission (page 11), the report calls for a ten-year net tax hike of $961 billion, nearly a $1 trillion tax increase over the decade.

The stated goal of the report is to raise the long-standing historical level of federal revenues from its average of 18 percent of GDP to 21 percent of GDP. According to President Obama’s own Office of Management and Budget, federal revenues have never been this high, and their data pre-dates World War II.

The report deceptively calls their net tax hikes “spending in the tax code.” There is no such thing, unless you assume the government has a right to all your money, and when they cut your taxes this is the same thing as “spending money on you.”

Additionally, the report calls for a tax hike “trigger” to take effect if Congress fails to enact comprehensive tax reform. This “trigger” would take the form of a 10 percent reduction in the mortgage interest deduction, charitable contribution deductions, the exclusion for employer-provided health insurance, and a host of other tax deductions and credits. This haircut would grow over time, eventually leading to untold trillions of dollars in tax hikes.

The gas tax would be raised by $0.15 per gallon beginning in 2013. All this money would be spent on union-dominated “Davis Bacon” construction projects. An American family with a 15-gallon tank who fills up weekly would see a tax hike of $117 per year.

There’s a stealth tax hike which involves slowing down how fast tax brackets adjust to inflation. Over time, American families would find themselves in higher tax brackets than they otherwise would. “Bracket creep” would begin to once again rear its ugly head.

Not counted in the $1 trillion tax hike is an expansion of the Social Security taxable wage base. Under current law, only the first $106,800 in wages and net income from self-employment are taxable. The report calls for the Social Security taxable wage base to gradually increase to nearly $150,000 (in today’s dollars) by 2050. This increases the marginal tax rate on work by 12.4 percentage points for workers in this income range.

Finally, the report calls for an automatic tax increase in any year that the budget is out of balance.